The TH Interview: Andy Ruben & Matt Kissler of Wal-Mart
by Jacob Gordon, Nashville, TN 
on 11. 7.07
Amid notable speculation and eyebrow-raising, Andy Ruben, the man leading Wal-Mart's sustainability charge, has stepped aside. Details of what goes on within Wal-Mart's HQ fortress in Bentonville can be scant, but Mr. Ruben was kind enough to speak with us about the change, as was his replacement, Matthew Kissler. As Ruben moves on to private brands at Sam's Club, his replacement brings with him the engineering of Wal-Mart's famous packaging scorecard (which we first mentioned here). In this interview, we spoke to both men about the shuffle, the future of Wal-Mart's sustainability lens, and what car seats and Hamburger Helper have to do with corporate eco-strategy.
You can read this rare exchange below, grab the podcast on iTunes, or click here to listen.
TreeHugger: Andy, the New York Times says that you were "reassigned;" that's sort of the big news here. Can you tell me what the deal is with this?
Andy Ruben: As you know, I've been involved in leading the sustainability efforts at Wal-Mart for the past three years or so. Of the three goals that we have, products is the third goal. Private brands is a dream. I mean, private brands sit on our shelves in the stores and connect to 137 million customers in the U.S. every week. It's a dream opportunity.
So I basically see this as a continuation of what I've been focused on, in a new way.
TreeHugger: And, Matt, you're jumping into this role. Can you tell me what this is going to entail and what you're most looking forward to?
Matt Kissler: Sure. First of all, really it's the same position that Andy is vacating as he moves on to private brands. So hopefully, this continues on the journey and the same path that we've been on as a company.
Obviously I'm tremendously excited about it personally for lots of different reasons. But professionally and in terms of where we're going as a company, I think it's just a great opportunity.
I've been involved in the sustainability activity, I could call it, within Wal-Mart almost since the beginning, from the first meeting that we had as a company. And certainly now it puts me more in the driver's seat. It's a fantastic opportunity for me personally and I'm looking forward to all the things we can do as a company.
TreeHugger: Now, there's been some speculation about what this means as far as overall strategy. Does this represent a change in strategy or a backing-off from any commitments?
So from day one it's lived in the business. The beauty of that is, as you make changes like this, it still lives within the business and just gets better.
Andy: In general, I would say no. Everything that we've done is about the role we play as a company. It's about the company, whether you're talking about Associates who are involved at store level, or you're talking about merchants. From day one, we've known that the way to make this thing real, to reach the potential we have, is to have this live in the business. And this means that when there's a merchant who's meeting with a supplier, they've got to be the one asking different questions, seeing with a different lens. It's the same with a supplier partner, or an NGO that we work with, et cetera.
So from day one it's lived in the business. The beauty of that is, as you make changes like this, it still lives within the business and just gets better.
Matt: I would just add that it's very common, I think, and very healthy to have transfers in and out of businesses. This is doing just that. Andy is moving into a position where he can further invest his abilities into our private brands, which is a large business unto itself.
Andy: And Matt was one of the leaders since the very first time we got together (and this was back in September of 2004) to really focus on sustainability. Matt's leadership in the packaging network has obviously been one of the very successful networks and efforts that we've had, with the packaging scorecard, and all the work that's gone on there. It's also a lot of consistency of involvement.
TreeHugger: So, Matt, maybe you can tell me a little bit about what that packaging stuff has involved; the scorecard. Can you unpack that a little bit, so to speak?
Matt: Sure. Very early on, when we first came up with our three areas, or three goals, as a company (one being waste), packaging was one we saw as an opportunity. Not only to reduce waste, but to change the game in terms of what we could do within the industry. So packaging has been with the network teams from the onset.
The packaging scorecard was developed by our network team. We're approaching probably 400 people on our network team, comprised of our suppliers, Wal-Mart and Sam's Club, and Wal-Mart International Associates, along with NGOs and the two leading academic institutions in packaging: Michigan State and RIT. And so that network team really built the scorecard.
What the scorecard does is evaluate the sustainability of a package that a supplier sells to Wal-Mart. Based on nine metrics it helps evaluate and give our buyers at Wal-Mart and Sam's Club another tool to help evaluate the sustainability of the packaging. It just gives them another tool to select items that eventually our company will buy.
One other add-on: there is a link to the website that allows packaging manufacturers who supply our suppliers a way to see the latest and greatest developments, new technologies, and new innovations in packaging that would help our suppliers improve their score.
It truly does build the sustainability of packaging within the packaging industry, but the trickle-down is to our suppliers, and then to the consumer who shops in our stores and our clubs.
Andy: Matt, I can remember a conversation that we had early on, in late 2004 and your comment was, "packaging is a really big opportunity.” Just about every supplier works with packaging, and just about every customer has the experience of getting a product home and dealing with the packaging.
TreeHugger: Matt, let me ask you this regarding your suppliers. Wal-Mart's been getting a lot of praise, and rightfully so, for its commitments to sustainability; but over here, we've been hearing some rumors that some suppliers aren't so happy with these changes. They feel that the onus is being placed on them. How do you navigate these relationships with your many suppliers?
Matt: Certainly, our relationship with our suppliers is, I think, a very good one. And certainly this is something that we want to have them join along with. Overall, I'd say the acceptance of it has been very strong.
We have had some suppliers who have had questions, more in the information requests that we've been making, than in the complexity or the difficulty of entering information into the scorecards. So I think it's an understanding process. It's something that certainly we're getting better at teaching our suppliers how to use, but also too, now that the scorecard's been out there since February of this year, the speed at which our suppliers are able to enter in information.
Just based on the comments we're getting, things have gone from hesitation and asking a lot of basic questions, as well as pushing back a bit, to now understanding the opportunity. I think overall we've had very good acceptance and the vast majority of our direct suppliers are embracing it. We've gotten past the hesitancy of entering the information in.
The car seat is selling better because customers—instead of getting a box they have to get rid of—they now get a reusable bag they can use to take that car seat on an airplane, etc.
Andy: Here's a perfect example of the direction making absolute sense as you sit down with suppliers or partners. How we actually get there is going to take time to work through. For example, there's a car seat right now that's being sold in every store. And it's a car seat we're all used to buying in a big box. When you get home, you have to figure out what to do with the box.
The supplier and the buyer of that car seat just worked to have those shipped nested, so you don't have the box. They shipped them three at a time. So we actually have seen an incredible cost benefit. The car seat is selling better because customers—instead of getting a box they have to get rid of—they now get a reusable bag they can use to take that car seat on an airplane, etc. They can see the car seat in the store, they can unzip the bag, feel it, etc.
It's the case where it just makes sense; it makes sense for us, it makes sense for the supplier, because it makes sense for the customer. So ultimately the scorecard is the mechanism, and that's where the relationship Matt talked about with our suppliers comes in: where we work on how to make that mechanism better. It’s just a matter of getting something out there and making it better—not waiting.
TreeHugger: So you've taken a big box out of the big box store, so to speak. Andy, looking back at the past few years with Wal-Mart, is there a moment when this overall vision for a sustainable company really clicked? Something visceral? Seeing organic cotton fields in Turkey, or having Al Gore come and speak at headquarters. Is there something that made this just lucidly visible to you?
Andy: You know, everyone has their own experiences and their own moment. For me, I was reading Paul Hawken's Ecology of Commerce.
All along, one of the things that has continued to amaze me is that as a business (and Wal-Mart obviously is a business) it’s about becoming a better business. And as we look at the value that we're unlocking, whether you're talking about the car seat, or the Hamburger Helper noodles, or something we're doing in our buildings or in our truck fleet, these are things that just make you a better business.
So I think the realization of where the world was, and what was going on, and putting that together with the opportunities for the business to look at the world differently, and thereby to become a better business, for its customers and shareholders, has been my excitement in the past few years.
TreeHugger: I can't resist, I have to ask you about the Hamburger Helper thing.
Andy: Sure. Well, you know, it's an example of a small change that has a tremendous ripple effect. So with Hamburger Helper, based on this lens of sustainability, they took a look at the Hamburger Helper noodles, and they figured out a way to basically straightened out those noodles.
Our CEO, Lee Scott, likes to say that very few people that he's spoken with buy Hamburger Helper because of the noodles. So the straighter noodles, customers actually like them better. It also reduces the size of the box, so we have better availability on shelf level by getting more product on the shelf. And finally, just that change alone from straightening out those noodles results in 500 trucks off the road every year that were previously on the road shipping that larger box.
It's just a perfect example where, as you get this to live in the business, and everyone asks different questions, and everyone's driving toward creating more value for the customer, you open up possibilities that weren't on the table a year ago.
TreeHugger: Many of our readers are very supportive of what Wal-Mart is doing, and many others—and maybe many of the same people who are supportive—are still very skeptical, even scathing about Wal-Mart as a whole. Why does Wal-Mart still attract such strong feelings? Why do you think you're treated differently from companies like Target who have a similar model (and are maybe less vocal about sustainability) but don't seem to attract such vocal opposition?
We said from day one: judge us by the results, judge us by our actions. You can spend your whole life trying to please other people; that's not our focus.
Matt: I think certainly our size does bring focus. We're the world’s largest retailer. I think too, that because this is coming from someone like Wal-Mart, it’s unexpected as if it came from some smaller, more specialized retailer.
I think anybody who has been to any of our events, anybody who has visited Bentonville or spoken to any of our people, I think they'll find that we are genuine. We mean what we say. And we're definitely making a positive difference in this space.
And to those people who still don't believe us, let us know who you are and we'd be glad to speak with you. Keep on watching us, and I think what you'll see in the coming weeks and months and years we'll be doing more to support the direction we're on.
We are obviously a large business entity, and certainly the largest retailer, and I just think this skepticism is good. I think it just makes us stronger, because we just try to work harder to persuade those people to believe what we're doing. Watch us, and if you don't believe it, I think you'll be surprised by what we’re doing. Hopefully you'll just support us and become a believer.
TreeHugger: Andy, what do you think?
Andy: We said from day one: judge us by the results, judge us by our actions. You can spend your whole life trying to please other people; that's not our focus. Our focus is on becoming a better business. I really like the way we spent the past few years, and the direction we continue to go, which is how do we continue to incorporate more of a lens to see the broader picture of things, and make changes like the car seat, to Hamburger Helper, the trucks, LED lights, that simply are better for the business and the world.
With that, I think there's some recognition that there will always be criticism. As long as we're focused in the right place, and we spend our days on things that really create changes in the world, it is just a more rewarding place to be spending energy. You know, when we make a move to LED lights in our freezers and coolers, and what that does to the technology, I am hopeful that we’ll continue to focus our effort on that kind of area as opposed to chasing around people who are going criticize and trying to respond to that.
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Social Ill's will always outweigh their attempts to lure the ignorant into their web.
Higher wages mean higher profits. But try telling Wall Street
Costco Wholesale Corp. handily beat Wall Street expectations on Mar. 3, posting a 25% profit gain in its most recent quarter on top of a 14% sales hike. The warehouse club even nudged up its profit forecast for the rest of 2004. So how did the market respond? By driving the Issaquah (Wash.) company's stock down by 4%. One problem for Wall Street is that Costco pays its workers much better than archrival Wal-Mart Stores Inc. does and analysts worry that Costco's operating expenses could get out of hand. ``At Costco, it's better to be an employee or a customer than a shareholder,'' says Deutsche Bank analyst Bill Dreher.
The market's view of Costco speaks volumes about the so-called Wal-Martization of the U.S. economy. True, the Bentonville (Ark.) retailer has taken a public-relations pounding recently for paying poverty-level wages and shouldering health insurance for fewer than half of its 1.2 million U.S. workers. Still, it remains the darling of the Street, which, like Wal-Mart and many other companies, believes that shareholders are best served if employers do all they can to hold down costs, including the cost of labor.
Surprisingly, however, Costco's high-wage approach actually beats Wal-Mart at its own game on many measures. BusinessWeek ran through the numbers from each company to compare Costco and Sam's Club, the Wal-Mart warehouse unit that competes directly with Costco. We found that by compensating employees generously to motivate and retain good workers, one-fifth of whom are unionized, Costco gets lower turnover and higher productivity. Combined with a smart business strategy that sells a mix of higher-margin products to more affluent customers, Costco actually keeps its labor costs lower than Wal-Mart's as a percentage of sales, and its 68,000 hourly workers in the U.S. sell more per square foot. Put another way, the 102,000 Sam's employees in the U.S. generated some $35 billion in sales last year, while Costco did $34 billion with one-third fewer employees.
Bottom line: Costco pulled in $13,647 in U.S. operating profit per hourly employee last year, vs. $11,039 at Sam's. Over the past five years, Costco's operating income grew at an average of 10.1% annually, slightly besting Sam's 9.8%. Most of Wall Street doesn't see the broader picture, though, and only focuses on the up-front savings Costco would gain if it paid workers less. But a few analysts concede that Costco suffers from the Street's bias toward the low-wage model. ``Costco deserves a little more credit than it has been getting lately, [since] it's one of the most productive companies in the industry,'' says Citigroup/Smith Barney retail analyst Deborah Weinswig. Wal-Mart spokeswoman Mona Williams says that Sam's pays competitively with Costco when all factors are considered, such as promotion opportunities.
Passing the Buck
The larger question here is which model of competition will predominate in the U.S. Costco isn't alone; some companies, even ones like New Balance Athletic Shoe Inc. that face cheap imports from China, have been able to compete by finding ways to lift productivity instead of cutting pay. But most executives find it easier to go the Wal-Mart route, even if shareholders fare just as well either way over the long run.
Yet the cheap-labor model turns out to be costly in many ways. It can fuel poverty and related social ills and dump costs on other companies and taxpayers, who indirectly pick up the health-care tab for all the workers not insured by their parsimonious employers. What's more, the low-wage approach cuts into consumer spending and, potentially, economic growth. ``You can't have every company adopt a Wal-Mart strategy. It isn't sustainable,'' says Rutgers University management professor Eileen Appelbaum, who in 2003 edited a vast study by 38 academics that found employers taking the high road in dozens of industries.
Given Costco's performance, the question for Wall Street shouldn't be why Costco isn't more like Wal-Mart. Rather, why can't Wal-Mart deliver high shareholder returns and high living standards for its workforce? Says Costco CEO James D. Sinegal: ``Paying your employees well is not only the right thing to do but it makes for good business.''
Look at how Costco pulls it off. Although Sam's $11.52 hourly average wage for full-timers tops the $9.64 earned by a typical Wal-Mart worker, it's still nearly 40% less than Costco's $15.97. Costco also shells out thousands more a year for workers' health and retirement and includes more of them in its health care, 401(k), and profit-sharing plans. ``They take a very pro-employee attitude,'' says Rome Aloise, chief Costco negotiator for the Teamsters, which represents 14,000 Costco workers.
In return for all this generosity, Costco gets one of the most productive and loyal workforces in all of retailing. Only 6% of employees leave after the first year, compared with 21% at Sam's. That saves tons, since Wal-Mart says it costs $2,500 per worker just to test, interview, and train a new hire. Costco's motivated employees also sell more: $795 of sales per square foot, vs. only $516 at Sam's and $411 at BJ's Wholesale Club Inc., its other primary club rival. ``Employees are willing to do whatever it takes to get the job done,'' says Julie Molina, a 17-year Costco worker in South San Francisco, Calif., who makes $17.82 an hour, plus bonuses.
Management Savvy
Costco's productive workforce more than offsets the higher expense. Its labor and overhead tab, also called its selling, general, and administrative costs (SG&A), total just 9.8% of revenue. While Wal-Mart declines to break out Sam's SG&A, it's likely higher than Costco's but lower than Wal-Mart's 17%. At Target, it's 24%. ``Paying higher wages translates into more efficiency,'' says Costco Chief Financial Officer Richard Galanti.
Of course, it's by no means as simple as that sounds, and management has to hustle to make the high-wage strategy work. It's constantly looking for ways to repackage goods into bulk items, which reduces labor, speeds up Costco's just-in-time inventory and distribution system, and boosts sales per square foot. Costco is also savvier than Sam's and BJ's about catering to small shop owners and more affluent customers, who are more likely to buy in bulk and purchase higher-margin goods. Neither rival has been able to match Costco's innovative packaging or merchandising mix, either. Costco was the first wholesale club to offer fresh meat, pharmacies, and photo labs.
Wal-Mart defenders often focus on the undeniable benefits its low prices bring consumers, while ignoring the damage it does to U.S. wages. Costco shows that with enough smarts, companies can help consumers and workers alike.
Holmes, Stanley, Zellner, Wendy. (2004). The Costco Way. Business Week. Issue 3878. Retrieved on 3/31 from Academic Search Premier Database.
Wal-Mart's track record is one of subterfuge and dishonesty. From what I see they are just looking for ways to reduce their own costs then calling it "green". This has nothing to do with having a conscience. Wal-Mart has no conscience and the only green they really know is the green they are stuffing in their registers. What about producing and buying local instead of shipping everything across the Pacific and trucking it across the nation. That might be a better start than straightening noodles and adding a plastic bag to a product that once came in much less environmentally deadly cardboard box.
You know, I have to read on AlterNet that the energy that will be used by number of new stores WalMart is planning to open will WIPE OUT all of the "green" sustainable things they are doing. (Tara Lohan, Sept 12, 2007)
Why the fascination with - and willingness to pass along the greenwashing by WalMart here on Treehugger? Won't the other big companies talk to you? A real "tree hugger" site would be posting (if not breaking) that news.
WalMart is no saint when it comes to social good, but their environmental initiatives are genuine and are haveing an enormous impact on how our nation uses energy.... There are gigantic knock on effects as they pressure their suppliers to sell them more efficient truck, and the good maufacturers to reduce packaging, etc... Those gains are not only seen on WalMart shelves, but also at other retail outlets.
If environmentalists cannot learn to recongnize when a company has seen the light, and work with them toward mutual environmental goals, then we are doomed to fail in the fight against global warming: business must be involved; it's too big a problem to be solved by your local co-op.
That does not mean that we should turn a blind eye at how WalMart treats their workers... but we should learn to praise them for their good works on energy while we continue to hold them to account in other realms.
It's easy to hate WalMart, but no one said that conftonting Global Warming was going to be easy.
With all due respect to Walmart, it dawned on me while traveling across country from Dallas to Newark, that 10 years ago GE was the largest employer in the USA, with the average wage at almost $20/hour.
Today, Walmart is the largest employer in the USA, and their average wage is almost 50% less.
What does that tell us (that should wake us up as to America's plight) about our economy, and our choices? We have no option but to perpare in every way possible, as soon as possible, for sustainable living. Where is the Whole Earth Catalog, now?
Im a little annoyed that Treehugger would even give these idiots a platform. Walmart is the largest importer of chinese products, china does a lot of business with the murderes in Darfur, not to mention their human rights violations. Shame on you walmart for thinking americans will fall for your
"green" advertising. Your shipping packages are also among the largest and most wasteful. I Actually wonder how the CEO's and Walton family sleep at night.
Why do they always say that WM employee's get 9-10 an hour? I worked 10 hours a day for $5.15,
no overtime, no benefits. I quit after 30 days because you could not get potty breaks. "employee's should use the restroom on their scheduled break" Bah! And they don't pay
overtime even tho they make you work overtime!
i think walmart's doing a good thing here. sure they're probably doing it for good PR and to reduce costs but they're also leading the way for other companies to follow. so no matter what their reasons are, its good period. also, for every acre they build a new store on they buy another acre to preserve from the state.
A lot of the companies reducing their packaging are doing so due to pressure from the European Union. WalMart is trying to take credt where credit is not due. It also seems as though Tree Hugger consistantly praises WalMart. Is this a case of payola?
just watch Wal Mart, the high cost of low price. that will take care of any sypathies any one might have for this company, green my a#@!
i can't believe what i'm reading! walmart on treehugger!! what's really going on here ? they are just trying to jump on the green bandwagon --"green'" advertising puhlease- green washing more like ! how about paying their employees more green ---allow unions in --benefits packages etc. i'm just astonished treehugger is even allowing them a platform ...wow.....